Local Redevelopment Agencies: Slush Funds or Economic Catalysts?

In January, California Governor Jerry Brown placed redevelopment agencies on the chopping block, stating that shutting down nearly 400 municipal redevelopment agencies would save the state’s 2011-2012 budget $1.7 billion.  But in June, state legislators passed bills AB 1X 26, which essentially eliminated agencies on October 1, and AB 1X 27, which prevents dissolution if cities pay their prorated share of $1.7 billion by the end of the year, and over $400 million annually.  In response, San Jose, Union City, and other cities have filed a lawsuit with the California Supreme Court, claiming that redirecting the money is unconstitutional and a violation of Proposition 22, which expressly prevents the state from raiding local tax coffers—including RDAs, they argue.  The case is scheduled for November 10, and implies a host of consequences for the state, the budget, and city redevelopment.

What is redevelopment?

According to the California Redevelopment Association, redevelopment is “a process authorized under California law that enables local government entities to revitalize deteriorated and blighted areas in their jurisdictions.”  Redevelopment agencies are tasked with the specific goal of rehabilitating blighted areas, and provide initial plans and funding for the projects to begin.  RDAs are locally governed and overseen by the local city council, county board of supervisors, or a separate board, which, in theory, makes the agencies accountable to the public.

Proponents of redevelopment assert that RDAs foster economic growth.  San Francisco Planning & Urban Research Association’s Executive Director, Gabriel Metcalf, states that RDAs are essential to long-term economic growth in California.  Metcalf argues that redevelopment is a tool to start the flow of private investment dollars back into blighted urban areas.  Redevelopment creates sustainable jobs and opportunities for entrepreneurship, and revitalizes deteriorated communities by replacing and upgrading outdated city infrastructure, providing affordable housing, and increasing the quality of life in struggling neighborhoods.  Advocates say that shutting down RDAs would permanently freeze planned and undergoing development projects, and that Gov. Brown has essentially tossed away a tool for growing the economy.

The opposition, in favor of Gov. Brown’s elimination of redevelopment in the budget plan, claim that redevelopment is just another perk of being a developer.  Assemblyman Chris Norby (R-72) calls redevelopment an “unknown government” that supplies “the most wasteful, the most fraudulent, and the most abusive” spending in California government.  In fact, the nonpartisan Legislative Analyst’s Office recently reported that there was no reliable evidence that redevelopment programs improve overall economic development in California.  Corruption and incompetence in agencies abound across the state, as revealed by one LA Times investigation.  According to state data, more than 120 cities spent over $700 million of their affordable housing funds between 2000 and 2008 without building a single new unit.

In any case, wiping redevelopment agencies off the face of California seems to be little more than a quick fix, Band-Aid type of solution to the bigger problem of the rapidly growing state deficit.  While cutting back expenses is a proper step in the right direction for reducing our deficit, there are certainly bigger fish to fry in the state—namely that high-speed boondoggle that will literally be the biggest train wreck in California history.  Redirecting $1.7 billion from the budget is mere chump change when compared to the whopping $98 billion we’ll be spending on California’s new choo-choo train.  Pension reform would also produce long-term, lasting results in mending our state budget and reducing government spending.  And, realistically, eliminating redevelopment agencies will not deliver the actual dollars needed to seal the budget gap and put our state finances back in order.

So—what’s the plan of action?  Should California commit $1.7 billion as a subsidy for public and private development, and risk the ongoing corruption and misuse of taxpayer dollars?  Or should it be rededicated to funds for education, public safety, and child welfare, putting economic growth and jobs on the line?

(Josephine Djuhana is Assistant Editor for the California Political Review.)

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